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COVID-19 & its impact on the hospitality industry

The ongoing Coronavirus (COVID-19) pandemic is affecting all sectors of society in some form or another due to the restrictions imposed by governments on the advice of health authorities across the globe. This impact has been keenly felt in the hospitality sector with many hotels now temporarily closed and likely to be so for the foreseeable future as nations tackle the spread of the virus.

Data from the origin of the virus in China estimates that approximately 40% of hotels are currently under temporary closure according to STR (a US data intelligence and global benchmarking firm). As the virus spread globally, a similar or more severe rate of closure is already being experienced in some of Europe’s tourist hotspots such as Italy and Spain with other nations such as Germany, UK and Ireland among others following suit.

These closures have resulted in a steep drop in the average occupancy rates. The severity of this drop varies from country to country depending on how the spread of virus is counteracted locally, the breakdown of visitor profile (business v leisure travel) they rely on and if guests are primarily international or domestic.

The major offshoot of the pandemic crisis is that with many industries under lockdown there is likely to be a significant global recession in the short-term as economies seek to slowly emerge from the sudden impact of the virus. The length and severity of this recession will ultimately be dependent on the role that governments, central banks, and the World Bank play in mitigating its impact.

From the perspective of the hospitality sector the key concerns revolve around the length of time it will take for the global economy to recover from this recession and importantly what lasting impact it will have on the travel habits and spend in both the business and leisure groupings.

Dealing with the ‘Now’

While travel restrictions remain in place, it should be noted for the time being that travellers still retain a similar purchasing power as they did prior to the COVID crisis. This should put a focus on the latter half of the year when it is hoped that the severity of the crisis will have eased. This will require hoteliers to be far more flexible when planning and budgeting for the remainder of 2020.

Once hotels do reopen it is likely that they may suffer from low occupancy due to the nervousness of travellers. It has been suggested that right-sizing rates to deal with this reduced demand would be a better approach than simply slashing booking rates across the board. This will require hotels to be creative in how they package their offerings with an added focus on ensuring the wellbeing of guests is paramount.

Many hotels have experienced significant cancellations as soon as restrictive measures and closures were put in place. It is considered properties should consider offering vouchers or attractive rebooking options instead of cancellations and refunds as a possible method of maintaining ‘on-the-books’ business.

Finally, with the post-COVID-19 market in mind, it is key for hoteliers to maintain visual presence for their existing and prospective customers during the current period. This can be done through digitally through existing marketing channels such as social media, paid advertising, and on-site updates such as blogs and news. Ultimately, hotels want to be at the front of people’s mind once restrictions are eased and travel can once again be considered.

A look to the future

Once travel restrictions are lifted, it is anticipated that the first segment to recover is the domestic corporate market. This is likely to be followed by the domestic leisure market through OTAs and direct bookings, however, international business will take a greater period to recover. As a result, the immediate focus of OTAs is likely to be both the domestic corporate and leisure markets for the remainder of 2020 but this trend is still dependent on wider economic and health factors.

Flexibility around cancellation policies will be a key component affecting customer sentiment once travel restrictions ease. Industry leaders have set the standard of refunding guests for cancelled stays during these temporary closures. With an eye on the future, flexibility and a high-level of courtesy with guests now will create a positive experience once domestic travel returns. With continued uncertainty likely post-COVID-19, it is likely that prospective guests may become more appreciative of refundable rates, so hoteliers need to monitor the market carefully.

The current downtime for hotels offers an opportunity to give extra time to stay informed with the market domestically and globally. For instance, utilise business intelligence tools and extract data sources available to you to get detailed, current information.

This period also provides an opportunity to take on tasks that may have been put on the long finger pre-COVID and allow for some strategizing for the post-COVID world.

Some key activities to undertake during this period:

Brainstorming around promotions and ideas once business begins to recover such as right-sizing rates and other innovative offerings.

Investigate and test new tools and technology that can benefit your business such as automated revenue management systems (RMS) and business intelligence (BI) tools.

Scenario planning for various occupancy and rate levels once reopening commences to allow hotels prepare for a variety of potential anticipated outcomes.

Examine Outsourcing opportunities for certain hotel activities such as finance, reservations, or digital marketing to allow adequate time for hotel to control costs in the early stages of recovery.

Working capital financing – Examine options whether through outside investment or more locally through grants and loans. Critical to have a clear understanding of which loans and grants hotels can avail of.

Other activities to consider are:

Clean up your email databases, booking and CRM systems.

Design or conduct staff training.

Invest in your digital marketing presence through your website, social media and advertising.

To conclude, navigating through these turbulent times will be a challenge for all sectors of the economy and the hospitality sector, in particular, but there are steps that can be done now that will put hoteliers in a position to take advantage of the recovery that will happen once the peak of the crisis has past.